This is a case study on Natureview Farm

2. 1989
Founded
Natureview
Farm did what?
Manufactured and
marketed refrigerated
cup yogurt
What was
unique?
What
happened in
1997?
What is its
revenue?
Recipe
contained?
Family yogurt
recipe developed
by the company’s
founder.
Natural ingredients and a
special process that added
that gave the yoghurt its
unique smooth, creamy
texture without artificial
thickeners
In 10 years,
Natureview Farm’s
revenues had grown
from less than
$100,000 to $13
million.
Equity infusion
from a venture
capital firm

3. VP MarketingCFOCEO
Jim Wagner
Christine
Walker
Barry
Landers
Vice president of
sales
Vice president of
operations
Assistant marketing
director
Kelly
Riley
Jack
Gottlieb
Walter
Bellini

4. CURRENT SITUATION

5. Challenge
Finding a path to
grow revenues by
over 50% before
the end of 2001

6. The Big Question
Should Natureview expand
into the supermarket channel
in order to meet its revenue
goal?

10. Expand six SKUs of the 8-
oz. product line into one
or two selected
supermarket channel
regions

11. Eight-ounce cups represented
the largest dollar and unit
share of the refrigerated
yogurt market, providing
significant revenue potential.
Uniquely positioned to
capitalize on the growing trend
in natural and organic foods in
supermarkets.
first-mover advantage into the
Supermarket channel

12.  The 8-oz. size received
the highest level of
competitive trade
promotion and marketing
spending.
 $120,000 would go
towards additional
marketing staff.
 Increase in overall
expenditure

13. Expand four SKUs of the
32-oz. size nationally

14. PROS The 32-oz. cups currently
generated an above-average
gross profit margin for
Natureview than 8-oz.cups
fewer competitive offerings
in this size.
marketing expenses would
be significantly lower as
well—only 10% of what was
projected for the 8-oz. size
in each region, representing
$120,000 per region per
year.

15. CONS New users were unlikely to
enter the brand via multi-use
size
Concern regarding the sales
teams ability to achieve full
national distribution in just
12months
Slotting expense higher
because of national
distribution
need to hire sales personnel
to establish relations with
supermarkets

16. Introduce two SKUs of
a children’s multi-pack
into the natural foods
channel

17. PROS Already had strong
relationships with the leading
natural foods channel
retailers,
Sales and marketing expenses
in this channel were lower.
Confidence of the sales team
to achieve distribution for the
two SKUs.
Financial potential was very
attractive.
High Growth potential in this
channel

18. CONS Not expanding in
the supermarket
channel would
mean a loss

19. Let’s Examine the
expenses and profits

20. Channel Selling
Price
Cost Price Margin Considered
Retailer $0.74 $0.74*0.73=
$0.54
27%
Distributor $0.54 $0.54*0.85=
$0.46
15%
Natureview $0.46 $0.31 ($0.46-$0.31)/$0.46 =
0.33 = 33%
2000 2001
Units Sold 35,000,000 35,000,000*1.2 = 42,000,000
Revenue (Units sold* S.P. per unit) =
35,000,000*0.46= 16,100,000
42,000,000*0.46=
$19,320,000
Cost 35,000,000*0.31=$10,850,000 42,000,000*0.31=$13,020,00
0
Gross.Profit $5,250,000(Revenue-Cost) 6,300,000
Option1
Gross Profit

21. Expenses
Advertisements 1200000*2(2 regions) =2400000 2400000
Broker’s fee 4% of manufacturer’s
sales(0.04*16,100,x000)=644000
0.04*19,320,000=
$772,800
Slotting Fee $1,200,000($10,000 per SKU per retail
chain)
-
SG&A $320,000 $640,000
Net Profit (Gross- Other Expenses )$686,000 $2,487,200
Net Profit

22. Channel Selling
Price
Cost Price Margin Considered
Retailer $2.70 $2.70
*0.73=$1.97
27%
Distributor $1.97 $1.97*0.85=$1
.67
15%
Natureview $1.67 $0.99 ($1.67-$0.99)/$1.67 =
0.407 = ~41%
Option2
2000 2001
Units Sold 5,500,000 5,500,000
Revenue Units sold* S.P. per unit =
5,500,000*1.67 =$9,185,000
5,500,000*1.67 =$9,185,000
Cost 5,500,000*0.99=$5,445,000 5,500,000*0.99=$5,445,000
Gross Profit $3,740,000(Revenue-Cost) $3,740,000
Gross Profit

23. Expenses
Marketing 120000*4(4 regions) =480,000 480,000
Broker’s fee 4% of manufacturer’s
sales(0.04*9185000)=367,400
0.04*9185000=
367,400
Slotting Fee $2,560,000($10,000 per SKU per retail
chain- $10000*4*64)
-
SG&A $160,000 $320,000(increase
by $160,000)
Net Profit (Gross- Other Expenses )$172,600 $2,572,600
Net Profit

24. Channel Selling
Price
Cost Price Margin Considered
Retailer $3.35 $3.35*0.65=$2.18 35%
Distributor $2.18 $2.18*0.91=$1.98 9%
Natural Foods
Wholesalers
$1.98 $1.98*0.93=$1.84 7%
Natureview $1.84 1.15 ($1.84-$1.15)/$1.84 = 38%
Option3
2000 2001
Units Sold 1,800,000 1,800,000*1.15(15%
increase) = 2,070,000
Revenue Units sold* S.P. per unit = 1,800,000
*1.84
=$3,312,000
2,070,000*1.84
=$3,808,800
Cost 1,800,000*1.15=$2,070,000 $2,070,000*1.15=$2,380,500
Gross Profit $1242000 (Revenue-Cost) $1,428,300
Gross Profit

25. Expenses
Marketing $250,000 $250,000
Complimentary
Cases
$3,312,000*2.5%=$82,800
(2.5% of the product line’s manufacturer
sales)
$3,808,000*2.5%=$
95,220
Net Profit (Gross- Other Expenses )$909,200 $1,083,080
Net Profit

26. Which Option to go for?
1)The revenue target of $20 million can
be achieved only by this method
2)It does not close the option of
supermarket channel which is crucial .
3)significant first-mover advantage into
the Supermarket Channel

27. Marketing Professor,
IIM Lucknow
Created by Dibya Maheswari,
Accenture Solutions Private Limited
during an internship under
Professor Sameer Mathur, IIM
Lucknow Dibya Maheswari,
Accenture Soln. Pvt Ltd.
Sameer Mathur